Seeking Alpha

Apple roundup: China Mobile, Samsung trial, procurement, iPhone 6 pricing

  • China Mobile (CHL) says it will unveil a new mobile service brand on Dec. 18, during the company's 4G partners conference. That's fueling hopes the world's largest carrier (700M+ subs) will make its long-expected iPhone (AAPL) launch announcement.
  • The WSJ has previously reported Apple is preparing to ship iPhones to China Mobile, and Chinese regulators have certified the iPhone for use on the carrier's 3G and 4G networks. A China Mobile launch is crucial to Apple's efforts to halt Chinese smartphone share losses to cheaper Android phones.
  • A USPTO examiner has invalidated Apple's '915 patent, which covers pinch-to-zoom and scrolling UI features. Though Apple will doubtlessly appeal, Samsung has filed an emergency motion to halt its damages retrial (previous) against Apple, since the '915 patent was the only one asserted in Apple's California suit for which it was claiming lost profits.
  • Digitimes reports Apple is taking control of component procurement from its contract manufacturers. If true, that suggests Apple sees room to improve its margins by handling procurement on its own.
  • Susquehanna notes a large-screen iPhone 6 (widely expected to launch in 2014) could carry a price premium (the firm estimates $50-$100), and thereby allow Apple to halt recent iPhone ASP declines. The current pricing for Samsung's Galaxy Note 3 phablet (AT&T and Verizon sell it for a subsidized $300) lends credence to that argument.
Comments (29)
  • God I hope it is Apple...
    21 Nov 2013, 09:59 AM Reply Like
  • let us pray...
    21 Nov 2013, 10:05 AM Reply Like
  • CHL will be a big deal for Apple, for certain, but it is not essential to Apple's revenue growth. The belief that it is essential is a false belief based on the false assumption that apple's decline in "market share" implies a related decline in volume, which belief is rooted in false reasoning. For a "market" that is expanding rapidly as a result of cheaper phones being replaced with cheap "smartphones", a loss in market share, in and of itself, means nothing at all. In and of itself, it does not imply a corresponding decrease in units sold, much less any decline in revenue. The loss-of-market-share argument is a specious argument that has been advanced by short sellers looking to drive down Apple share volume. This will become obvious to everyone come late January, when Apple's numbers will demonstrate conclusively that there is no meaningfull correlation between "market share" and units sold, in the smartphone market, much less any correlation with earnings.
    21 Nov 2013, 11:47 AM Reply Like
  • Agreed.
    Methinks CHL needs AAPL more than the other way around.
    Also, I cannot believe CHL's Dec. 18 announcement could be any other company than Apple. Who else have they been pussy-footing around with for the last 3 or more years?


    PS to all the AAPL longs who worry too much: a contract with CHL means access to 700 M more subscribers putting them to over 1B available customers in China. How can that not be huge?
    21 Nov 2013, 09:45 PM Reply Like
  • Supposedly a CHL executive told the WSJ that the new carrier is ready to begin 4G mobile services despite the lack of an operating license from China‚Äôs Ministry of Industry & IT. Apple is claimed to already have a license so from that angle one could suspect it's not Apple...however other indications and logical deduction suggest it could well be. It doesn't seems likely to be a bit player, so one could ask what major player(s) besides Apple are not on their network and have a pending or recent license? Also, when they say "new carrier" it's unclear to me if they mean "new to their 4G" or "new in entirety"?
    21 Nov 2013, 11:06 PM Reply Like
  • China Mobile is a big deal...time to add on Apple imo. Regardless of how Apple is doing right now (which is good I think), bigger phones, China Mobile, NTT DoCoMo, and further growth around the world in places like India make it a buy. The other huge issue is Apple selling at a very deep discount to the market. So many stocks are selling with PEs of 20-25, when you realize Apple is half that amount it is much less risky, and actually at risk for expanding multiples. Black Friday will see a lot of Apple stuff fly off the shelves, too. The chart reminds me of the 4S intro--late '11. Now is the time to get in, as next year is likely to head much higher.
    21 Nov 2013, 10:01 AM Reply Like
  • Sorry, but the last bullet point is not an apples to apples comparison (no pun intended). The Galaxy Note 3 has 32GB of internal memory (priced at $300 with 2 year contract) whereas the iPhone 5s with 32GB of internal memory is also $300 with 2 year contract. The Note 3 is not priced at a premium to the iPhone. The difference is explained away by internal memory size.
    21 Nov 2013, 10:19 AM Reply Like
  • True, but it's worth noting the 32GB Galaxy S4 (another high-end/flagship Samsung phone) only goes for a subsidized $250. A premium is clearly being charged for the Note's larger display.
    21 Nov 2013, 10:26 AM Reply Like
  • "A China Mobile launch is crucial to Apple's efforts to halt Chinese smartphone share losses to cheaper Android phones."


    True statement.


    It is also true that an iPhone launch with China Mobile will halt China Mobile share losses to other carriers that already support iPhones.
    21 Nov 2013, 10:33 AM Reply Like
  • I wonder why revenue market share makes the focus of so many Apple commentators and analysts? Earnings market share is much more important and the two of them are not related in direct proportion. Apple has a formidable position at the top of the market. Nobody can (currently) climb there. Precisely the best position to be in.
    21 Nov 2013, 12:21 PM Reply Like
  • @bgold...Your last statement is much more true than your quotation statement. China Mobile needs Apple, that's why this thing will fly.
    21 Nov 2013, 09:52 PM Reply Like
  • Not to worry, Apple's patents will be upheld by *someone* (hint, hint future apple employee) up the food chain. Waiting for the day Apple patents "rolling rectangular box with four wheels at the corners" and demands an injunction against all car makers.


    Apple's getting creamed by Samsung, wasting its time on pointless patents and Tim Cook is a colossal failure.
    21 Nov 2013, 11:25 AM Reply Like
  • @Deja Vu:


    "Apple's getting creamed by Samsung, wasting its time on pointless patents and Tim Cook is a colossal failure."


    That's a joke, right? so come on, what's the punchline?
    21 Nov 2013, 09:56 PM Reply Like
  • I really really wish I could be a failure like Tim Cook.
    21 Nov 2013, 11:39 AM Reply Like
  • Yup. This is great news. AAPL is only down -0.42 and the Dow is up 90. Just another day of market up, AAPL down. I guess we'll have to wait for the CHL deal and the IPhone 6. Uh Huh!
    21 Nov 2013, 12:18 PM Reply Like
  • Wow, you mean Apple is still in business? I thought from some comments here that Samsung bought them already....


    Yeah, Cook is no good. They better get that bigmouth Elon Musk to help save Apple. ha ha, yeah sure.


    After Christmas sales numbers come out people will maybe give Apple a little more credit.
    21 Nov 2013, 01:41 PM Reply Like
  • Be careful here though, if this turns out to be someone other then $AAPL we could see it test $500 again due to disappointment..
    21 Nov 2013, 01:54 PM Reply Like
  • Good, lower price means my dividend from Apple buys me more shares.


    My goal is have the maximum number of shares of AAPL. Later the share price or dividends will be higher, or both. I can wait.
    21 Nov 2013, 02:51 PM Reply Like
  • You would say that even if the stock went to $10... so i guess there isn't really much point to commenting.
    21 Nov 2013, 03:11 PM Reply Like
  • if the rumor is true it would almost double Apples market. "Buy the rumor, sell the news," is already out of the barn and has been for ages. In fact, I don't think there is any hay,left in the field, for the horses to eat. I don't expect to see much of a bump if it's true, however I do see one on the down side if it turns out to be false. As a holder of the stock, I hope it's true. As a customer, it's going to get a lot harder to get your hands on any new product, which leaves me with a tough question....... Is it illegal for my 13 year old daughter to camp in line for a couple of days, so I can get their latest and greatest creation. I hope Apple will have chargers down there, so she can charge up to call her mother? Just kidding, it was thinking about her mother, calling us.
    21 Nov 2013, 02:41 PM Reply Like
  • 2putt, too hard for me to predict the future. I would expect a strong rally should it turn out to be true. Just look at the added profits. I figure, conservatively, $3-$5 annual EPS increase due to CHL alone. $5-$10 maybe. But at 12X ( about half the market PE with cash figured) we are looking $36-$60 conservative and $60-$120 on the maybe figures. It certainly isn't priced in now. As the valuations stay high, and bonds stay scary, investors will be looking for quality for a fair price. Apple is one of the cheapest stocks available. The financial strength is as good as it gets, and growth may be returning. The rotation should push it much higher. We will see. You never know what Mr. Market will come up with...
    21 Nov 2013, 03:09 PM Reply Like
  • Humble, you have been commenting on how the market hasn't got a clue on the size and the speed of the train that's about to hit them. You and I were smart enough to book tickets on it when it was at the station so we don't have to worry about it ramming up our rear ends. I agree with your numbers, but like I said, I don't agree with the how the market has been treating the company.
    21 Nov 2013, 04:00 PM Reply Like
  • I mean no offense with this statement, but I highly doubt the two of you are smarter than the market and institutional investors, particularly with how much coverage Apple receives. The market has treated Apple this way for over a year and people on seekingalpha have been continuously ranting how "undervalued" Apple is. If you're investing on P/E I think you will be disappointed. Obviously everyone has there own opinions, but I think it's rather comical to see each and every day people ranting and raving about how "undervalued" Apple is and jump in before you miss the big move up. Well... it's been a long time and no one has missed the huge move up.


    If investing were that easy, I think everyone would make money.
    21 Nov 2013, 05:02 PM Reply Like
  • 2much, I can easily find cheap insults almost anywhere; I like the give and take here on investments. So what is your point on Apple as an investment? Do you think it is overvalued? Perfectly valued? Why? Sounds like you have it figured out from your tone, so let's get your prognosis on Apple. Thx.
    21 Nov 2013, 07:23 PM Reply Like
  • @2MuchDebt; Yeah, no offense, but I doubt that you are as smart as Carl Icahn or David Einhorn either, and they think that Apple is undervalued too. I don't pretend to know Icahn's motives wrt Apple or whether he is in for the long haul, but I believe he's right about Apple being undervalued now.
    21 Nov 2013, 08:15 PM Reply Like
  • Most of the ranting came when the price was around 400 not so many months ago. It's now trading at 520 so I think the ranting was justified. I'm guessing you missed that move.
    21 Nov 2013, 08:38 PM Reply Like
  • Very clever move and perfect timing. Let's assume that CHL's iPhone sales would begin three or four weeks after the announcement on Dec 18, and you'd notice that Western holiday season is over and iPhone sales would already have peaked. Just the opposite is the case in China, where New Year celebration and the biggest spending season takes place on Jan 31.


    What this means for Apple is that it's going to hit the Chinese markets with full steam, and the iPhone supplies should be ready to fulfill the huge demand Apple's going to face. Apple also gets a nice period of time to prepare properly for the occasion with massive marketing and pre-orders.
    21 Nov 2013, 04:39 PM Reply Like
  • iPhone, iPad all appear in China Mobile's 4G promotional video.


    This is from google translate:


    "Want to be a pioneer in 4G LTE experience, enjoy one second to download video, online real-time video calls, real-time HD video surveillance? This is no longer a dream! Between 18 December and 18 January, Shenzhen China Mobile will recruit 365 4G LTE friendly customer to have first experience on the first network terminal, a full range of business and other fun test all cross the city! Using our CPE card you have six months free trail on the 4G network in the LTE coverage area . An opportunity not to be missed? Immediately enroll now!"


    Looks like this is a free 4G service sweepstakes, enroll between 12/18 & 1/18, they will announce the 365 winners after Chinese New Year, and give them free device and 6 month free trial.
    21 Nov 2013, 11:38 PM Reply Like
  • @BookValue -- Well said. Also, note Foxconn's shift from 5C to 5S, which is believed to ramp up production numbers to meet increased demand. Then, hopefully by the time Chinese New Year is over and the sales slump begins, there is a refresh or a new product out there to keep momentum.
    22 Nov 2013, 12:27 PM Reply Like
DJIA (DIA) S&P 500 (SPY)